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The Authors' Take - Coty Germany v Parfümerie Akzente

In
his Opinion of 26th July 2017 in Coty Germany GmbH v Parfümerie Akzente GmbH, C‑230/16, Advocate General (AG) Wahl
provided his interpretation of Article 101 TFEU and Regulation (EU) No 330/2010
(the Regulation). The request for a preliminary ruling came from the German
Higher Regional Court (Oberlandesgericht Frankfurt am Main), and was made in
the context of a dispute between cosmetics giant Coty Germany and one of its
distributors, Akzente.

The
question is whether Coty’s new selective distribution agreement, which
prohibited the discernible use of third party websites, is precluded by EU
antitrust provisions. Azkente wanted to use Amazon.de to market the goods,
thereby gaining access to Amazon’s enormous active user base as well as lower
marketing costs and the option to have orders fulfilled by Amazon itself.

Article
101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits
agreements which distort competition, either by object or effect. Under the Regulation, vertical agreements are presumed to be exempted
from Article 101(1) TFEU via Article 101(3) TFEU, provided that
neither the supplier’s nor buyer’s market share exceeds 30%.

Does the agreement distort competition?

According
to the AG, the agreement falls outside Article 101(1) TFEU. This is because,
when factors other than price are taken into account, Coty’s requirement does
not cause appreciable anti-competitive effects. In reaching this
conclusion the AG adopted the view – extant in both competition and trade mark
decisions – that a luxury product loses its value to the consumer if it becomes
commonplace. The preservation of this ‘aura’ is therefore capable of offsetting
anti-competitive effects. This qualitative assessment, or ‘appreciability’
test, is a source of uncertainty for parties when drafting agreements. The
Opinion, if followed by the Court, should be welcomed by the Luxury Cosmetics
industry, worth €203b in 2016. Its effect is to create a
presumption that an agreement aiming to preserve prestige is not caught out,
provided it is non-discriminatory and proportionate.

Clarifying Pierre Fabre

However,
if the ‘object’ of an agreement is deemed to be anti-competitive, Article
101(1) applies and no qualitative analysis occurs. This, the AG explained, was
what led the court in Pierre Fabre Dermo-Cosmétique ,
C-439/09, EU:C:2011:649 (Pierre Fabre), to declare ‘the aim of
maintaining a prestigious image is not a legitimate aim for restricting
competition’. In that case an absolute ban on internet sales was
classified as restriction by object. A full and much needed delineation of the
‘object’ category will have to wait for a future reference but a comparison
between Pierre Fabre and the instant case indicates that
proportionality is a key factor whether a ‘sufficient degree of harm’ has
occurred.

The
AG went on to confirm that, even if Article 101(1) did apply, the agreement
would qualify for the Block Exemption under the Regulation. An agreement cannot
benefit from the exemption if it is deemed to be a ‘hardcore restriction’. This
is along the same lines as a restriction by object under Article 101(1), but
more user-friendly because it sets out prohibited restrictions. The AG
concluded that a restriction on discernible third party platforms constitutes
neither a territorial limitation nor a restriction of passive sales.

So,
a probable reprieve for luxury cosmetics suppliers, but the rapid evolution of
the e-commerce sector means the proportionality assessment could soon favour
distributors. Nor is the debate settled about law’s role in protecting
prestige, although the interdependent evolution of trade mark law means the
concept is fairly entrenched.

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

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The principal contents of this weblog are drawn from the Current Intelligence features which are published monthly in JIPLP.

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